As 2017 closes and 2018 dawns, I was able to review some of the headlines from Wall Street Journal, that I see with rising alarm. Here are the articles that highlight growing concern the way I see things, going forward, with dates published.
1. Both parties Deft at Ignoring Rising Deficit. Page A4.
2. Risks Lurk in Emerging Markets. Page B1
3. Cash Wave Heads for the dollar Page B1
3. A banner Year of Corporate Debt Page B12.
Buyers Snap Up Riskier Leveraged Debt Page B1
New Hope for India’s Debt Woes Page B11
Malaysia’s IMDB Makes a Crucial Debt payment Page B10
Dollar is Destiny for Emerging Markets Page B1
Saturday-Sunday Edition 12-30/31 2017
Indonesia’s Komodo Bonds Stir to Life
The world is awash in liquidity as these series of articles document. Beneath all this is the graph on page B12, 12-27-17 of the Wall Street Journal (bottom right corner), that shows the US Fed and ECB reducing net asset purchases. Furthermore, the US Fed is bent on raising Fed funds rates. The two central banks are acting to drain global liquidity, and raise borrowing rates simultaneously. Central Banks act on a glacial pace (slow), but the effects are of slow burn. The effect is Tuesday’s article “Cash Wave Heads for the dollar”. The cash tsunami heading into US $ is spurred by changes in US taxes, but will have the effect of further draining global $ liquidity.
For now, asset markets are taking these developments in their stride, and yes, as well documented by Cam, the S&P could well approach 3000-3500, give or take. No one has a crystal ball in this game, but a day of reckoning is approaching, as the Fed takes the punch bowl away.
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Also see our past work on big picture macro analysis